In India, cheque is a negotiable instrument. As the payment is done through the bank, there cannot be any denying that cheque is not a concrete proof of payment. An account payee cheque or crossed cheque is undoubtedly a very safe way of making payment. Legally, the persons, who writes the cheque is called the “drawer” and the person who receives the cheque is known as “payee”. In the parlance of banking, the person, who receives the payment through the bank, is called “drawee”. A cheque is normally valid for six months and beyond this period, this will be known as an invalid cheque.
What is bouncing?
A cheque can be cashed only on its due date or on the date mentioned on it. But the important thing is the account must have enough cash when the cheque is presented for payment. If in any case, the account does not have enough balance of cash, then it is sure that the cheque will be dishonored without payment, which in banking parlance is called “bouncing”.
What does bouncing mean in legal parlance?
Cheque bouncing is a criminal offence in India. Under the Negotiable Instrument Act 1881, bouncing of a cheque is punishable by fine and jail-term on the person, who has issued it. Since 1881, this act has gone through repeated amendments.
What happens when usually a cheque bounces?
- After the bouncing of the cheque, almost every bank in India issues a “Cheque Return Memo” to the banker of the person, who received the cheque and deposited in his bank. In legal parlance, he is called the “payee” of the cheque. The payee of the cheque can represent it in the bank for payment after informing the drawer (giver) of the cheque for payment. The option is also open to the payee to proceed legally against the drawer of the cheque.
- If the cheque was given for the purpose of gifts or any other illegal purpose, then drawer of the cheque cannot be prosecuted.
- Section 138 of the Negotiable Instrument Act 1881, prescribes that the payee has to send a notice to the drawer of the cheque within 30 days of receiving the Cheque return memo from his bank. In his notice to the drawer, he can demand the payment to be made to him within 15 days of date of receipt of his notice.
- If the drawer does not pay within the 15 days time, then the payee can file a complaint in the court of jurisdictional magistrate within one month of date of expiry of the 15 days time mentioned in the notice to the drawer.
Provision of punishment for the drawer of the Cheque
The punishment in such cases might be double of the amount stated in the cheque or a jail term up to 2 years.
Let’s see the provisions maintained by some of the banks.
Cheque Bounce Charges from different Banks in India
HDFC Bank shall recover penal interest from the customer for the period during which the bank did not have funds to meet the demands for payment from the people in the account.
State Bank of India
State Bank of India imposes following charges for cheque bouncing.
- The SBI Bank charges Rs 75 to Rs 250 for local cheque depending upon the the post-dated EMI cheques.
- For the bouncing of outstation cheques through own bank, it charges Rs 150 + other charges.
- For bouncing of outstation cheques through another bank, Rs 150 + any other charges as applicable.
- Axis Bank charges Rs 350 for local cheques for return or bouncing of cheques.
- For outward cheque return, Axis Bank charges Rs 100 only.
- The Canara Bank charges Rs 40 to 50 for bounce cheque for your inward local and outstation cheques.
- For outward local and outstation charges, bank charges a fine of Rs10-Rs 15.
- The ICICI bank charges Rs 350 for incoming local and outstation cheques as a fine..
- For outgoing local and outstation cheques, the bak charges Rs 100 as fine.
- For incoming local and outstation cheques, bank charges Rs 275.00.
- For outgoing local and outstation cheques, the bank fines Rs 100.00.
- The IDBI Bank is the only bank that has waived all the charges except the charges for return or bouncing of cheques.